Tesco chief quits over accounting bloomer
Print Edition
THE chairman of Britain’s biggest retailer Tesco resigned yesterday as the troubled group said a huge accounting error began earlier than thought and contributed to plunging profits.
Chairman Richard Broadbent said he would be stepping down after an independent investigation found that Tesco had overstated profits by 263 million pounds (US$422 million) as a result of accounting errors stretching back to well before 2013.
“The board’s immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly,” Broadbent said in a statement that revealed Tesco’s net profit had crashed to 6 million pounds in its first half from 820 million pounds a year earlier.
Tesco, the world’s third-biggest supermarket group, stunned investors one month ago when it revealed that its profit for the six months to August 23 was overstated by an estimated 250 million pounds.
Following an independent probe by accountants Deloitte, the final figure was put at 263 million pounds, which includes overstatements of 70 million pounds for Tesco’s last financial year and 75 million pounds relating to pre-2013/14.
“The issues that have come to light over recent weeks are a matter of profound regret,” Broadbent said.
Tesco has suspended eight executives since recently appointed Chief Executive Dave Lewis launched an inquiry into the accounting error that has triggered a separate probe by British regulator the Financial Conduct Authority.
Last month, US billionaire investor Warren Buffett’s investment company also cut its holdings in the group.
“Not only is the firm reporting a bigger accounting error than expected, but it is also not giving shareholders any indication of what it could report as a profit for its full year,” said Joshua Raymond, chief market strategist at City Index traders.
While Tesco has been forced to massively adjust its reported earnings, the supermarket has in any case seen profits hit in recent times by increased competition in main market Britain.
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